Designing a regulatory tool for coordinated investment in renewable and conventional generation capacities considering market equilibria

Morteza Aryani, Mohammad Ahmadian and Mohammad-Kazem Sheikh-El-Eslami

Applied Energy, 2020, vol. 279, issue C, No S0306261920312198

Abstract: Environmental concerns and energy security issues have led to the rapid growth of renewable capacities in the power sector. With the increase in the penetration of renewables, conventional generations such as thermal technologies have faced the decreased market prices, reduced volume of sold energies and thus diminished revenues. The decrease in the interests for investment in conventional capacities resulting from revenue deficiency from one side and high penetration of non-dispatchable renewables such as wind and solar generations from the other side may hinder the generation adequacy. So, the investment in conventional and renewable capacities should be done in a coordinated manner to meet both adequacy and environmental goals. Thus, the present study is conducted to present a regulatory tool for coordinated incentive design of investment in conventional and renewable generation capacities considering market equilibria. To this aim, a bi-level model is proposed where in the first level, regulator determines capacity-based and energy-based incentives paid for conventional and renewable generations, respectively, considering targets for adequacy and environmental issues. In the second level, the investment behavior of generation companies in response to investment incentives is anticipated using a game-theoretic model. Our results show that regulatory targets for adequacy and environmental issues are simultaneously realized by the proposed coordinated incentive design. Besides, cost of the designed incentives considerably reduces compared to the recent works.

Keywords: Incentive design; Capacity payment; Feed-in premium; Carbon tax; Capacity investment equilibrium; Game theory (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0306261920312198
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:appene:v:279:y:2020:i:c:s0306261920312198

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/bibliographic
http://www.elsevier. ... 405891/bibliographic

DOI: 10.1016/j.apenergy.2020.115728

Access Statistics for this article

Applied Energy is currently edited by J. Yan

More articles in Applied Energy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().